Text Size

FIRST LOOK: SENATE BANKING CHAIR ON WALL STREET REFORM — From Senate Banking Committee Chairman Tim Johnson’s opening remarks as prepared for delivery at this morning’s high-profile hearing on Wall Street reform: “Many of the law’s remaining rulemakings, like QRM and the Volcker Rule, require careful consideration of complex issues as well as interagency and international coordination. I appreciate your efforts to finalize these rules. To date, the regulators have proposed or finalized over three-fourths of the rules required by Wall Street Reform. … But there is still more work to do. …

“I ask that you craft these rules in a manner that is effective for smaller firms, like community banks, so they can continue to meet the needs of their customers and communities. … While concerns have been raised about whether a few firms remain ‘too big to fail,’ Wall Street Reform provides regulators with new tools to address the issue head on. This is one of the many reasons why full implementation of the law remains important, not just for our constituents, but for future generations.”

FIRST LOOK II: COMPTROLLER SAYS BANKS MUCH HEALTHIER — From Comptroller of the Currency Thomas J. Curry’s prepared testimony: “I am pleased to report that the institutions we supervise have made significant strides since the financial crisis in repairing their balance sheets through stronger capital, improved liquidity, and timely recognition and resolution of problem loans. For national banks and federal savings associations, Tier 1 common equity is at 12.5 percent of risk-weighted assets, up from its low of just over 9 percent in the fall of 2008.

“The current capital leverage ratio is now about 9 percent, which is up almost a third from its recent low. Reliance on volatile funding sources has dropped from its fall 2006 peak of 46 percent of total liabilities to 24 percent today. Asset quality indicators are improving with charge-off rates declining for all major loan categories. Indeed, for all but residential mortgages, charge-off rates have now dropped below their post-1990 averages.” Full testimony: http://bit.ly/WK7pDa

FIRST LOOK III: BANK SAFETY LEVEL INCREASES — Financial Services Roundtable’s Tim Pawlenty and CBA’s Richard Hunt this morning will present the latest Hamilton Financial Index (HFI) snapshot of bank safety: “Combining both financial stress and industry-level capitalization, the HFI provides a snapshot of the risks in the system and how prepared financial firms are to confront these challenges. …

“The 2012 fourth quarter reading of the HFI is 1.28, or 28 percent above pre- crisis norms. Change was minimal from the last quarter, however, the year-over-year increase was strong. In the second half of 2011, the HFI fell from 1.24 to 1.15 as financial stress jumped and capital levels dipped. Since that time, financial stress has decreased and the Tier One Common Capital ratio surged to over 12.6 percent, bringing both the third and fourth quarter readings of the HFI to 1.28 in 2012." http://bit.ly/XAPcnd

FIRST LOOK IV: YES, CHINA IS SPYING ON YOU — Bloomberg Businessweek cover story: “Yes, the Chinese Army is Spying on You” by Dune Lawrence and Michael Riley: “Reports over the past month have proven that the U.S. is the target of a sustained cyber espionage campaign, with China as the most aggressive attacker. Chinese makers of malware, code that attacks corporate and government computers, don’t trip up a lot.

Malware expert Joe Stewart was able to track the every move of one hacker who did — and Bloomberg News then traced Zhang Changhe to the gates of Chinese military university, the People's Liberation Army's Information Engineering University.” Cover image: http://bit.ly/X5xz1A Story: http://buswk.co/hacker

THIS MORNING ON POLITICO PRO FINANCE – Patrick Reis and Kate Nocera take a look at Elizabeth Warren’s early days in the Senate… Kelsey Snell on the Lew confirmation hearing… A look at what regulators plan to tell Senate Banking today… To learn more about Pro's subscriber-only coverage -- and to get Morning Money every day before 6 a.m. -- please contact Pro Services at (703) 341-4600 or info@politicopro.com.

GOOD THURSDAY MORNING -- Happy Valentine’s Day! The president and first lady are headed to West Palm Beach Fla. on Friday for a little V-Day weekend R&R. What do you all have planned? Feels like an Arby’s night to me. http://bit.ly/PSl43p

DRIVING THE DAY — President Obama heads to Decatur, Ga. to visit a pre-K classroom and tout his SOTU plan for universal pre-K access. … Obama takes part in a Google+ hangout around 4:50 p.m. to discuss the SOTU. … Senate Banking hearing begins at 10:30 a.m. … Initial jobless claims at 8:30 a.m. EST expected to dip slightly to 360K from last week’s 366K. …

HUNT/PAWLENTY CALL — Former Gov. Pawlenty and CBA’s Richard Hunt hold a call at 10:00 a.m. to discuss the current state of the banking industry and the results discussed above. … CALL-IN NUMBER: 1-800-434-1335 … PASSCODE: 929128#

MINIMUM WAGE PRIMER — Daniel Massey emails: “The most rigorous economic research over the past 20 years shows that raising the minimum wage boosts worker pay without causing job losses — even in regions where the economy is weak or unemployment is high. … You had some healthy skepticism [in MM] on whether the measure would pass. …

“Consider this: Polling consistently reveals broad public support for raising the minimum wage: A national poll conducted in 2012 found that nearly three in four likely voters (73 percent) support increasing the minimum wage to $10 per hour and indexing it to inflation. The same poll showed 50 percent of Republicans and 74 percent of Independents favoring an increase in the minimum wage.”

BOEHNER SAYS NO — House Speaker John Boehner said he would not support legislation to raise the minimum wage: “Listen, when people are asking the question ‘Where are the jobs?’ why would we want to make it harder for small employers to hire people? I’ve got 11 brothers and sisters on every rung of the economic ladder. I know about this issue as much as anybody in this town. … What happens when you take the rungs away on the economic ladder, you make it harder for people to get on the ladder. Our goal is to get people on the ladder and help them climb that ladder so they can live the American dream.”

JACK LEW CRUISES — No blows landed on Treasury nominee Jack Lew at Wednesday’s hearing (as we predicted there would not be). Even the questions from Sen. Orrin Hatch and other Republicans on Lew’s Citi tenure and Cayman accounts had little pop or follow-up. One close observer noted that Lew got one question about Benghazi and zero about the Volcker Rule. Ladies and gentlemen, your United States Congress!

TADE PACT HOPES RISE — NYT’s Nicholas Kulish and Jackie Calmes on pg. A1: “Obama’s call for a free-trade agreement between the United States and the European Union has unleashed a wave of optimism on both sides that a breakthrough can be achieved that would lift trans-Atlantic fortunes. … Experts cited tough economic times on both sides of the Atlantic and a perceived need among European leaders for a cause to unify their frayed union as major reasons that an agreement might be reached now. … But an even greater consideration, they said, was the growing economic might of China. …

“Proponents hope that a comprehensive trade agreement will not only raise economic growth, but also lower prices for European and American consumers and give new impetus to a relationship that has lacked forward momentum almost since the end of the cold war. Talks could begin in late May or early June. Negotiations are not expected to be easy, with entrenched interests, especially in protected sectors of the agriculture industry, fighting to maintain their subsidies and preferences.” http://nyti.ms/WoqARf

JAPAN REMAINS STUCK IN RECESSION — FT’s By Jonathan Soble: “Japan remained mired in recession in the last three months of 2012, government data showed on Thursday, as the economy defied experts’ expectations for a mild rebound in a development that could help insulate Tokyo against criticism surrounding the recent plunge of the yen. The data indicated that Japanese gross domestic product fell 0.1 percent between October and December … in the third contraction in as many quarters. That compared with a median forecast of 0.4 per cent annualised growth. …

“Investors took the downbeat GDP data in their stride. The stock market began its afternoon session 0.5 percent. … The government’s measures — namely, increased public spending and pressure on the Bank of Japan to adopt a looser monetary policy — have had the effect of significantly weakening the yen, to the delight of Japanese exporters and the irritation of some of Japan’s trading partners.” http://on.ft.com/X5DOCv

GOP DRAFTS SPENDING BILL — POLITICO’s David Rogers: “With a governmentwide spending bill due to expire next month, House Appropriations Committee Chairman Hal Rogers is proposing to substitute a modified version that puts defense and veterans programs on more permanent footing and better able to deal with threatened across-the-board cuts March 1. … Senate Appropriations Committee Chairwoman Barbara Mikulski, who met with Rogers later, said his strategy was ‘a very interesting idea’ and she welcomed his ‘pragmatic’ approach. … [M]uch will depend on an expected meeting Thursday between Speaker John Boehner and Senate Majority Leader Harry Reid.

“As outlined by Rogers, Congress would extend the current continuing resolution, or CR, through Sept. 30 for most agencies. But for the Pentagon and Department of Veterans Affairs, the Kentucky Republican would splice in the full text of the much more detailed draft Defense and VA spending bills already negotiated with the Senate Appropriations Committee. This would give the military more flexibility to adapt to the cuts, especially in the case of operations and maintenance accounts.” http://bit.ly/Yf7b4w

ALSO FOR YOUR RADAR --

A FISCALLY CONSERVATIVE POPE? -- Lance Roberts writes: “It is clear that, according to the Bible, debt is a sin. Therefore, should the new Pope not be as concerned about the ‘fiscal sins’ of its flock just as much as their ‘moral health?’ The challenge for the new Pope, as the head of a church that represents one out of every seven people on the planet, should be to start the process of steering civilization back onto the path of moral and fiscal prosperity.” http://bit.ly/12BOk55

ARIEL INVESTMENTS CEO ON HOOPS -- On Reuters TV, Robert Wolf interviewed John Rogers, CEO of Ariel Investments and former captain of the Princeton basketball team. At 5:53, see footage of Rogers beating Michael Jordan one-on-one. … Rogers has played ball against the president and at 4:49 he evaluates Obama’s game.” http://reut.rs/VVQLN0

AMERICAN/USAIR APPROVE MERGER — WSJ’s Mike Spector and Susan Carey: “The boards of American Airlines parent AMR Corp. and US Airways Group Inc. late Wednesday separately voted to approve a merger that would create the world's largest airline. … The merger will be formally announced early Thursday morning, and court documents outlining all of the deal's details are set to be filed the same day with the U.S. Bankruptcy Court in New York overseeing American's reorganization. …

“Under the all-stock deal's terms, American's creditors would own 72 percent of the combined airline, and US Airways shareholders the balance. US Airways Chief Executive Doug Parker will run the combined company as chief executive. AMR CEO Tom Horton will serve as nonexecutive board chairman. ... The airline will likely have a market capitalization exceeding $10 billion, and the value could approach $11 billion.” http://on.wsj.com/WopYes

TIME WARNER MAY SELL SOME OF MAGAZINE BUSINESS — FT’s Andrew Edgecliffe-Johnson: “Time Warner is in preliminary talks to spin off most of its Time Inc and IPC Media magazine businesses into a publicly traded joint venture, valuing them at as much as $2.4 billion — $3 billion, in a move that could herald the biggest shake-up of the U.S. and U.K. periodical markets for decades. Two people familiar with the discussions said Meredith, the U.S. publisher of magazines such as Better Homes and Gardens, Family Circle, Ladies’ Home Journal and Every Day with Rachael Ray, had made an approach about combining the two companies’ titles. …

“The talks, described as ‘early stage’, would see Time Inc’s celebrity, style and lifestyle titles such as People, Southern Living and Real Simple offloaded alongside all of IPC, the London publisher behind Marie Claire, InStyle and Wallpaper*. Meredith would manage the joint venture but Time Warner would retain a stake for the immediate future. … Time Warner would retain full ownership of Time magazine, the newsweekly founded by Henry Luce; Fortune, its business magazine, which first reported the sales talks; and Sports Illustrated.” http://on.ft.com/X5DWSm

** Presented by the American Action Forum, a center-right policy institute providing data-driven insight and solutions to today's defining domestic policy challenges. The Forum's products are injecting forward-thinking, relevant ideas that will build a better economic future with limited government.